GLOBAL MARKETS-Asia stocks, bond yields climb as trade war fears ebb

* MSCI Asia-Pacific index up 0.3%, Nikkei gains 1.1%
* Trump predicts trade deal after positive gestures by China
* Dollar lifted as safe-haven bond yields rise
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Shinichi Saoshiro
TOKYO, Aug 27 (Reuters) - Asian stocks rose in step with
their global peers while safe-haven bonds retreated on Tuesday,
as signs Sino-U.S. trade hostilities might be easing for now
helped restore investor confidence after the previous session's
rout.
Supporting the market mood, U.S. President Donald Trump on
Monday flagged the possibility of a trade deal with China and
said he believed Beijing was sincere in its desire to reach an
agreement. Global markets had been roiled at the start of the
week by new tariffs from the world's two largest
economies. MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was up 0.3% after dropping 1.3% the previous
day.
The Shanghai Composite Index .SSEC advanced 1%.
South Korea's KOSPI .KS11 added 0.8% and Japan's Nikkei
.N225 rose 1.1%.
Equity markets may have found traction for now but the
longer-term outlook for risk assets, buffeted repeatedly by
trade concerns, remained shaky.
"There is still a large element of uncertainty regarding the
U.S.-China trade dispute. It remains difficult to foresee a
resolution, and this will continue to weigh on equity market
sentiment," said Shusuke Yamada, chief Japan FX and equity
strategist at Bank Of America Merrill Lynch.
"Apart from the trade war, the equity markets also have to
keep an eye on Brexit proceedings, monetary policy of key
players such as the European Central Bank and moves in the
Chinese yuan."
China's onshore yuan CNY= nudged down to a fresh 11-year
low of 7.1566 per dollar.
China has allowed the tightly-managed yuan to slide some
3.6% so far this month as trade tensions with the United States
worsened. This has triggered fears of a global currency war, in
which countries try to weaken their currencies in an attempt to
soften the blows of a broader economic slowdown.
"It is clear that the trade conflict between the United
States and China is getting ever more serious. The two may still
opt to negotiate, but prospects for a quick resolution have
diminished greatly as neither side can back down," said
Yoshimasa Maruyama, chief market economist at SMBC Nikko
Securities.
"The trade conflict only increases the torment on the global
economy."
The dollar held gains made the previous day helped by a
rebound in U.S. Treasury yields.
The dollar index .DXY versus a basket of six major
currencies stood at 97.990, having risen about 0.5% overnight.
The benchmark 10-year U.S. Treasury yield US10YT=RR was at
1.523%, pulled back from a three-year low of 1.443% reached on
Monday on the back of wide-spread risk aversion.
The Japanese 10-year government bond yield JP10YTN=JBTC
was up 2.5 basis points at minus 0.255% after plumbing minus
0.285% on Monday, its lowest since July 2016.
The greenback traded at 105.770 yen JPY= following a 0.7%
gain on Monday, when it had brushed an eight-month low of
104.460.
The euro EUR= was effectively flat at $1.1104 after losing
0.4% on Monday.
The Australian dollar AUD=D4 , sensitive to developments in
China, Australia's largest trading partner, was steady at
$0.6773 following a gain of 0.3% the previous day.
Crude oil prices recovered some ground as the broader
markets stabilised, trimming some of their significant losses
the previous day on the prospect of crude from Iran, currently
facing sanctions, hitting the market. O/R
Brent crude futures LCOc1 were up 0.46% at $58.97 per
barrel after losing 1% the previous day. U.S. crude CLc1 rose
0.6% to $53.96 per barrel.
Oil prices fell on Monday after French President Emmanuel
Macron said preparations were underway for a meeting between
Iranian President Hassan Rouhani and President Trump in the
coming weeks to find a solution to a nuclear standoff.
(Editing by Sam Holmes and Jacqueline Wong)